Cenvat Credit in respect of Repair and Maintenance

[puneet virmani]

A is engaged in trading of Airconditioners & also into the business of repair & maintenence contracts of Airconditioners undertaking AMC's. Further A is taking input tax cerdit @100% in respect of input service in relation to Repair & Maintenence /Security and on telephone/courier/photocopy/medical insurance of employees paid by employer taking cenvat credit retricted to 20% of service tax payable.Kindly explain whether claiming correct.

[Surender Gupta]

Yes, Maintenance or Repair / Security and other Services in terms of rule 6(5) are eligible for 100% cenvat credit. Rest of the services, Cenvat Credit is restricted to 20% of service tax payable.

AI Summary

Cenvat credit eligibility: repair, maintenance and security services qualify for full credit while certain employee-related services face restricted credit.
Repair and maintenance and security services used for the taxable activity of repair contracts and trading of air-conditioners qualify for full Cenvat credit under the eligibility provision, whereas other input services provided for employees such as telephone, courier, photocopy and medical insurance attract a prescribed restriction and therefore only limited Cenvat credit may be availed.